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Farmers Union speaker: Trade deficit continues to pull U.S. economy down
By Robert Pore
robert.pore@theindependent.com
America needs a national economic goal, which begins with reforming the nation's trade policies that are hemorrhaging this country's jobs and treasure overseas, said Michael Stumo of the Coalition for a Prosperous America.
Stumo was a featured speaker Friday at the Nebraska Farmers Union convention, which is being held in Grand Island this weekend.
While agriculture has constantly enjoyed a trade surplus, Stumo said current trade policies, including the concept of free trade, could cause future concern for Nebraska's farmers and ranchers.
But, Stumo said, the nation's agricultural industry is split on what actually should be this nation's trade goals.
"We have had this free trade belief, but it's just a belief and not based on facts and quantitative performance," he said.
Stumo said the nation's free trade policies have performed negatively and don't conform to what this country's trade policy should be.
"There is so much that is not free trade going on that you can't even call it free trade," he said. "What we should have is smart trade because what we have now is dumb trade."
Stumo said the Coalition for a Prosperous America was started in 2006 and represents agriculture, organized labor and manufacturing.
What is at the core of the coalition and ties the three groups together, according to Stumo, is the loss of domestic market shares through unfair trade practices.
He said because of U.S. trade policies, there is a massive trade deficit that is "sucking our gross domestic product and jobs dry."
Stumo said throughout U.S. history, the country has always had a trade surplus.
But the country's trade problems started with the passage of the North American Free Trade Agreement and the rise of China as a world economic power, he said.
One-third of the nation's trade deficit is because of this country's dependency on foreign oil and another third is the flooding of U.S. markets with Chinese goods and the rest is everything else, Stumo said.
What's behind the flood of Chinese imports is that country's manipulation of its currency. By China devaluing its currency, Stumo said, that's paramount to that country subsiding its exports by 40 percent or more, which makes those products cheap to American consumers, and at the same time drives U.S. manufacturing jobs overseas.
And it also adds to global warming as those overseas manufacturers don't follow the same environmental standards as U.S. manufacturers.
"This is jobs, investment and production that we could have had in the U.S. if we had national economic goals," Stumo said. "This is the growth that we could have had here, but we have forfeited it to these free trade deals and the WTO (World Trade Organization), which has allowed other countries to engage in unfair trade practices that we have either refused or been unable to neutralize and now we are being penalized for."
Also, Stumo said the U.S. is one of the few countries in the world that doesn't have a value-added tax. With a value-added tax, a tax is levied on the added value that results from the exchange of goods and services.
"Every country has this value-added tax where consumption occurs and what that means is when we send products to Europe, China, Brazil or another country in the world, we pay, on average, an 18 percent tax going across their border and it's WTO legal," Stumo said.
But it also works in reverse as when a country sends a product manufactured there to the U.S., that government then refunds that VAT tax back to the company that manufactured the product, Stumo said.
"It's like paying a company to export and that is called an export subsidy," he said. "Everybody does it to us. That doesn't sound like free markets to me."
Stumo said that the growing trade deficit in the U.S. is "our great recession that we are trying to come out of right now."
He said the loss of manufacturing jobs to other countries has amounted to a 40 percent pay cut for Americans who are now scrambling for jobs in the nation's lower paying service industry.
Stumo said despite the record agricultural trade surplus in 2008, the trend line for agricultural trade has been trending to where agricultural imports are rapidly gaining on our exports. A lot of that gain in 2008 was in value and not necessarily in volume. For example, the amount of corn exported in 2008 was less than 2007, but the value of that corn was higher.
The USDA this week reported that fiscal 2010 agricultural exports are forecast at $98 billion, up $1 billion from the August forecast and $1.4 billion above final FY 2009. Though the forecast is below the record 2008 level, exports are expected to be the second highest ever, according to the USDA.
Final FY 2009 imports fell a record $5.9 billion from FY 2008 due to falling demand resulting from the global recession, the USDA reported. However, the USDA said FY 2010 agricultural imports are forecast up $4.1 billion to $77.5 billion. The increase, according to the USDA, consists of an additional $400 million in livestock and meats, $200 million in dairy products, $200 million in grains and feeds, $650 million in oilseed products, $1.4 billion in horticulture, and $1.2 billion in sugar and tropical products.
Stumo said there are 17 countries that the U.S. has free trade agreements with, but instead of being bilateral, most of that trade is coming in from countries with which we have those free trade agreements and most of those countries have value-added taxes.
"With all of those countries where we have free trade agreements with, we are under water in all ag trade," he said.
Stumo said free-market capitalism worldwide is now losing out to dictatorial capitalism or more state-controlled capitalism.
"We think that once a country becomes capitalist they will be a democracy with a small 'd,' but that's not true because a dictatorship and capitalism go well together," he said.
While the U.S. does not have a national economic plan, Stump said, other countries, such as China and India, do have policies that are working to take advantage of the U.S. lack of a national plan.
"They have a plan, we don't and when you don't have a plan and the other guy does, you lose," he said. "If we want jobs, you have to produce things here. We consume too much and produce too little. We have to produce it here."
Stumo was a featured speaker Friday at the Nebraska Farmers Union convention, which is being held in Grand Island this weekend.
While agriculture has constantly enjoyed a trade surplus, Stumo said current trade policies, including the concept of free trade, could cause future concern for Nebraska's farmers and ranchers.
But, Stumo said, the nation's agricultural industry is split on what actually should be this nation's trade goals.
Stumo said the nation's free trade policies have performed negatively and don't conform to what this country's trade policy should be.
"There is so much that is not free trade going on that you can't even call it free trade," he said. "What we should have is smart trade because what we have now is dumb trade."
Stumo said the Coalition for a Prosperous America was started in 2006 and represents agriculture, organized labor and manufacturing.
What is at the core of the coalition and ties the three groups together, according to Stumo, is the loss of domestic market shares through unfair trade practices.
He said because of U.S. trade policies, there is a massive trade deficit that is "sucking our gross domestic product and jobs dry."
Stumo said throughout U.S. history, the country has always had a trade surplus.
But the country's trade problems started with the passage of the North American Free Trade Agreement and the rise of China as a world economic power, he said.
One-third of the nation's trade deficit is because of this country's dependency on foreign oil and another third is the flooding of U.S. markets with Chinese goods and the rest is everything else, Stumo said.
What's behind the flood of Chinese imports is that country's manipulation of its currency. By China devaluing its currency, Stumo said, that's paramount to that country subsiding its exports by 40 percent or more, which makes those products cheap to American consumers, and at the same time drives U.S. manufacturing jobs overseas.
And it also adds to global warming as those overseas manufacturers don't follow the same environmental standards as U.S. manufacturers.
"This is jobs, investment and production that we could have had in the U.S. if we had national economic goals," Stumo said. "This is the growth that we could have had here, but we have forfeited it to these free trade deals and the WTO (World Trade Organization), which has allowed other countries to engage in unfair trade practices that we have either refused or been unable to neutralize and now we are being penalized for."
Also, Stumo said the U.S. is one of the few countries in the world that doesn't have a value-added tax. With a value-added tax, a tax is levied on the added value that results from the exchange of goods and services.
"Every country has this value-added tax where consumption occurs and what that means is when we send products to Europe, China, Brazil or another country in the world, we pay, on average, an 18 percent tax going across their border and it's WTO legal," Stumo said.
But it also works in reverse as when a country sends a product manufactured there to the U.S., that government then refunds that VAT tax back to the company that manufactured the product, Stumo said.
"It's like paying a company to export and that is called an export subsidy," he said. "Everybody does it to us. That doesn't sound like free markets to me."
Stumo said that the growing trade deficit in the U.S. is "our great recession that we are trying to come out of right now."
He said the loss of manufacturing jobs to other countries has amounted to a 40 percent pay cut for Americans who are now scrambling for jobs in the nation's lower paying service industry.
Stumo said despite the record agricultural trade surplus in 2008, the trend line for agricultural trade has been trending to where agricultural imports are rapidly gaining on our exports. A lot of that gain in 2008 was in value and not necessarily in volume. For example, the amount of corn exported in 2008 was less than 2007, but the value of that corn was higher.
The USDA this week reported that fiscal 2010 agricultural exports are forecast at $98 billion, up $1 billion from the August forecast and $1.4 billion above final FY 2009. Though the forecast is below the record 2008 level, exports are expected to be the second highest ever, according to the USDA.
Final FY 2009 imports fell a record $5.9 billion from FY 2008 due to falling demand resulting from the global recession, the USDA reported. However, the USDA said FY 2010 agricultural imports are forecast up $4.1 billion to $77.5 billion. The increase, according to the USDA, consists of an additional $400 million in livestock and meats, $200 million in dairy products, $200 million in grains and feeds, $650 million in oilseed products, $1.4 billion in horticulture, and $1.2 billion in sugar and tropical products.
Stumo said there are 17 countries that the U.S. has free trade agreements with, but instead of being bilateral, most of that trade is coming in from countries with which we have those free trade agreements and most of those countries have value-added taxes.
"With all of those countries where we have free trade agreements with, we are under water in all ag trade," he said.
Stumo said free-market capitalism worldwide is now losing out to dictatorial capitalism or more state-controlled capitalism.
"We think that once a country becomes capitalist they will be a democracy with a small 'd,' but that's not true because a dictatorship and capitalism go well together," he said.
While the U.S. does not have a national economic plan, Stump said, other countries, such as China and India, do have policies that are working to take advantage of the U.S. lack of a national plan.
"They have a plan, we don't and when you don't have a plan and the other guy does, you lose," he said. "If we want jobs, you have to produce things here. We consume too much and produce too little. We have to produce it here."
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